Chapter 9 adjacent

STOCKTON - Tracy City Manager Leon Churchill does not work in Stockton, but there is no doubt he has the city's bankruptcy on his mind.

Scott Smith

STOCKTON - Tracy City Manager Leon Churchill does not work in Stockton, but there is no doubt he has the city's bankruptcy on his mind.

Tracy's financial health is OK, he said. The county's second-largest city balanced its budget, borrowing $1.5 million from reserves. That is nothing compared with Stockton's $26 million deficit, which tipped it into bankruptcy.

Stockton's tale offers a stark lesson, he said.

"This should be a bellwether time to learn that we should not repeat the same mistakes," Churchill said.

He is hardly alone. Community leaders in other San Joaquin County cities, schools and business have turned their attention to Stockton, which filed for Chapter 9 bankruptcy protection Thursday.

They are comparing their notes with Stockton, the county seat. It also is the county's largest city, which in many ways defines the reputation of the wider region.

Outlying communities often get lumped into what has been defined as the Stockton Metropolitan Area, essentially all of San Joaquin County.

County Administrator Manuel Lopez might be tied to Stockton's hip more than any other.

The city and county are distinct, yet they partner on animal control and libraries. Geography makes the two inseparable; the seat of county government is in downtown Stockton.

Lopez said he feels empathy for the city's employees, who might see a change to their paychecks and Stockton residents wondering what could change in their lives.

"What do I know about psyche?" he said. "I'm a person, and those kind of things cross my mind - what's next?"

He also feels relief. The county's finances are in reasonably good shape. About five years ago, he and the Board of Supervisors received strong pressure to start paying for retiree health care.

The board resisted, Lopez said, keeping it from a major cause of Stockton's crisis.

Manteca and Tracy have relatively small budget deficits that they are able to fill with reserve funds. Neither city says it has anywhere close to the problems of Stockton.

Yet, Manteca has a steady stream of money from Bass Pro Shops and Big League Dreams. At 300 permits a year, the city is building more new homes than all the other communities in the county combined, McLaughlin said.

"Lots of irons in the fire," she said.

Churchill, Tracy's city manager, said he lost his economic development director to Vallejo, the most recent California city to file bankruptcy until Stockton.

He called her move to help that city rebuild "the ultimate professional challenge." Stockton, Churchill predicted, would make a quick rebound and likely learn from its mistakes.

Schools have separate sources of funding from the city, so bankruptcy has no direct impact on the Stockton Unified, Superintendent Steve Lowder said.

"We feel for them," he said. "It's a huge problem."

Policing remains a school district a concern, he said. Stockton Unified has its own police force, but officers work in partnership with the city's.

California school districts might not be far behind in financial insolvency, Lowder said. School funding in the state budget hinges on the passage of two proposed tax increases in November.

"If both of those fail, we're out of business," Lowder said. He said many school districts statewide are vulnerable, but Stockton Unified is not among those at immediate risk of going broke.

The day after the Stockton City Council voted for bankruptcy Tuesday, University of the Pacific's students, parents, faculty and staff received a letter from President Pamela Eibeck.

She reinforced Pacific's support to city leaders and expects Stockton to endure this painful stage for a brighter future. She said City Hall's problems won't affect campus life.

"Our finances remain robust," she said, adding that the university is on the verge of announcing an ambitious strategic plan.

Developer Dan Cort offered a more critical point of view. He has invested his heart, soul and pocketbook into restoring downtown Stockton's historical homes and high-rise structures. He has his own theory about what led the city to bankruptcy.

City leaders allowed developers to build hundreds of homes in north Stockton and they forgot its core. They did not follow his lead, moving into older buildings inside the city's central business district.

The multimillion dollar buildings that city leaders did build downtown were "tributes" to themselves, not sincere investments.

Douglass Eberhardt is president and CEO of the Bank of Stockton, which shares the city's name and has a history almost as old. Being Stockton's namesake is problematic these days, he said.

Before he criticizes anything Chapter 9 related, Eberhardt said he awaits Stockton's plan detailing how it will rebuild after bankruptcy. His bank has already lived with the hardship of several regional and national recessions.

The only uncomfortable moment for him related to Stockton's bankruptcy was learning that CNN had broadcast a shot of the iconic "Bank of Stockton" sign in a story on the city's troubled finances.

"That doesn't help us," he said. "Those are things you just have to expect."